Capitol Update 5/22/2023
California Employers May Request a Deferral to File Labor Contractor Employee Report
On May 10, 2023, private employers with 100 or more employees, with at least one employee based in California, must file their annual pay data reports with the California Civil Rights Department (CRD). Annual pay data reports consist of (1) a Payroll Employee Report, and/or (2) a Labor Contractor Employee Report.
· A Payroll Employee Report covers pay and demographic data for employees on an employer’s payroll in the prior calendar year.
· A Labor Contractor Employee Report separately covers pay and demographic data for labor contractor employees hired through labor contractors in the prior calendar year (for example, temporary employees).
· The Labor Contractor Employee Report is new for 2023.
· A labor contractor is an “individual or entity that supplies … a client employer with workers to perform labor within the client employer’s usual course of business.”
· A labor contractor employee is an “individual on a labor contractor’s payroll, including a part-time individual, and for whom the labor contractor is required to withhold federal social security taxes from that individual’s wages, and who performs labor for a client employer within the client employer’s usual course of business.”
· A Labor Contractor Report is required only if a private employer has 100 or more labor contractor employees working for it.
· To gather data for the Labor Contractor Report, employers must request the data from their labor contractors, who in turn are obligated by law to provide specified data to their customers.
Since April 18, 2023, CRD has been accepting “enforcement deferral requests” to allow employers more time to file the Labor Contractor Employee Reports. To make such a request, an employer must first register itself in the CRD’s pay data reporting portal and then submit the request through the portal. If the request is granted, it is not considered an extension. The CRD will simply defer – through July 10, 2023 – seeking an order of compliance for the employer to file its Labor Contractor Employee Report. More
Soft spots in the nonresidential sector are expected this year, tempering the outlook for construction but leaving room for cautious optimism, four economists have said at the Build Beyond Today/The Construction Economy Outlook event. Possible slowdowns in several categories are likely to “be outweighed by investment in manufacturing plants and data centers, infrastructure and eventually in power categories,” says Ken Simonson, chief economist for the Associated General Contractors of America. Full Story: Daily Commercial News (Ontario)
PPI for final demand advances 0.2% in April; services rise 0.3%, goods increase 0.2%
The Producer Price Index for final demand rose 0.2 percent in April. Prices for final demand services increased 0.3 percent, and the index for final demand goods advanced 0.2 percent. Prices for final demand moved up 2.3 percent for the 12 months ended in April.
In April, the Consumer Price Index for All Urban Consumers increased 0.4 percent, seasonally adjusted, and rose 4.9 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.4 percent in April (SA); up 5.5 percent over the year (NSA).
Below are the monthly updates from the most current April 2023 fuel price data (GasBuddy.com) and February 2023 electricity and natural gas price data (US Energy Information Administration). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca. The added costs under California policies, regulations, taxes, and fee add-ons continue to keep prices at the highest or near the highest among the contiguous states and DC across all energy sources. Natural gas prices show the state continuing to lose ground in its rankings as the higher prices due to pipeline shortages earlier this year are incorporated into the data.
The April gasoline average in California was largely stable, rising only 2 cents from March. The price gap with the other states eased somewhat as the average price rose slightly higher, up 18 cents, in the rest of the US. Prices have since continued to ease slightly, down another 5 cents in California according to the latest results from CSAA as of May 5, and down 7 cents in the overall US average. While crude prices currently are playing a moderating role on retail prices, Californians are in store for another price bump due to the pending increase in gasoline and diesel taxes on July 1. Diesel prices—a core factor in food and other goods inflation—saw somewhat larger easing, down 21 cents in California and down 11 cents in the average for the other states. Average electricity rates and the average annual residential electricity bill continued to break records as the state’s energy and related polices continue to push the cost of this energy source to new heights, even as the state continues to force more household and employer
reliance on electricity in the future.
April PIT Revenue $3.8 Billion Below Budget Projection
The state collected $7.49 billion in personal income tax (PIT) revenue during the month of April – approximately $3.8 billion less than anticipated in Governor Gavin Newsom’s January budget proposal – according to the PIT revenue tracker maintained by the State Controller’s Office. The revenue figures are not good news for a state facing an operating deficit estimated to be at least $22.5 billion – a January projection that is expected to grow significantly when Newsom unveils his updated budget plan and fiscal projections this week. From the beginning of the 2022-23 fiscal year through the end of April, the state collected $79.68 billion in PIT revenue, or roughly $45 billion less than during the same period last year. However, the figures are not an apples-to-apples comparison, as the filing deadline was extended this year (from April 18 to October 16 for most California taxpayers), making it likely that much of the state’s PIT revenue will arrive far later in the year than usual. Newsom’s 2023-24 budget proposal, released in January, estimated that April PIT collections would total $11.29 billion, representing 5.44 percent of total general fund revenue of $207.34 billion projected for the 2022-23 fiscal year, which ends June 30. The January projection was based on the filing deadline being extended to May 15, as the estimate was made before the second extension of the deadline. Newsom’s deadline is May 14 – Mother’s Day this year – to release a revised budget proposal with new revenue and spending projections. The Legislature’s deadline for sending a budget bill to the governor is June 15. The courts have ruled that this bill does not have to comprise a complete budget, so budget “trailer bills” often are approved after the deadline. Given the uncertainty of the PIT collections, which typically account for roughly half of the state’s total revenue, observers expect the Legislature to delay many budget decisions until late in the year, after an expected rush of payments near the October deadline.
Coastal Construction has demonstrated how artificial intelligence vastly automates estimation and lets contractors stop wasting time on menial tasks such as tracing and coloring plans. Large contractors with extensive data from past projects are well positioned to shape how AI evolves in the industry, but it will take time to develop enough case studies, including unsuccessful ones, to build trust among project owners, says Kris Lengieza, vice president of global partnerships and alliances at Procore Technologies. Full Story: SmartBrief/Infrastructure
Federal Reserve policymakers have signaled they expect interest rates to stay high for an extended period and to potentially rise even higher, given persistently elevated inflation. This contrasts with market activity that shows expectations of rate decreases later this year. Full Story: Reuters Bloomberg
Regional Federal Reserve Presidents See Some Way Before Inflation Is Back To Target
Bloomberg reports that Federal Reserve Bank of Atlanta President Raphael Bostic and Minneapolis Fed President Neel Kashkari spoke today regarding inflation. Bostic said, “If you look at most measures of inflation, they’re still two times where our target is. And so that’s a long distance still to go.” Kashkari said, “We at the Federal Reserve probably have more work to do on our end to try to bring inflation back down.” Chicago Fed President Austan Goolsbee “told CNBC that it had been a close call whether he dissented against the rate hike policymakers delivered earlier this month, out of concern that officials not over-tighten, though he ultimately voted to go along with it.” Goolsbee also suggested that the right policy now may be to “sit and watch it,” but “he stopped short of endorsing a pause in June.” CNBC reports that Bostic “said Monday that he doesn’t foresee rate cuts at least through 2023, even if there’s a recession.” Bostic added, “What we’ve seen is that inflation has been persistently high, consumers have been really resilient in terms of their spending, and labor markets remain extremely tight. All of those suggests that there’s still going to be upward pressure on prices.” Goolsbee told CNBC, “When you have these big times of uncertainty, let’s be prudent and patient and watch a lot more data than we normally do.” He added, “We’ve still got a few weeks before for the next meeting, but [we’re] watching the credit stresses, watching the craziness of the debt ceiling, and watching what’s happening in the labor market, and the prices.”
The Dodge Construction Network economics group estimates a short breach of the debt ceiling would cause construction starts to go from a 2% increase this year to a 3% decrease. The group says a prolonged breach would lead to a 14% drop in starts for 2023 and a 9% drop in 2024.Full Story: Dodge Data & Analytics
President Biden Signals Willingness To Accept Some Work Requirements As Part Of Debt Deal
Bloomberg reports that “the amount of money that the US government has on hand to pay its bills plummeted by $53 billion, increasing the chances that the government will run out of cash by early June if the debt limit isn’t raised or suspended by then.” According to Bloomberg, the Treasury Department’s cash balance “fell to $87 billion on Monday from $140 billion on Friday, partially due to a larger volume of state and local government securities redemptions than anticipated.” The New York Times reports that President Biden, “just moments before he departed on Wednesday for a diplomatic trip to Asia, said he was confident ‘America will not default’ as congressional leaders in both parties offered some signs of optimism about eventually reaching a deal to raise the nation’s borrowing limit. ‘Every leader in the room understands the consequences if we failed to pay our bills,’ Mr. Biden said at the White House on Wednesday.” According to the Times, Biden’s “decision to get a final word in on the negotiations signaled that even as he departs for a summit on the global economy, the White House is focused on averting an economic crisis back home.” The Times says Biden has “signaled he was open to a potential agreement for tougher work requirements on federal aid programs,” and when “asked on Wednesday if he was still considering work requirements, Mr. Biden said it is possible.” But Biden added, “I’m not going to accept any work requirements that’s going to have an impact on the medical health needs of people.” The New York Times also reports that Biden “has indicated openness to considering adding new work requirements for recipients of food stamps and other federal aid, a Republican demand opposed by Democrats in the House and Senate.” However, Politico says Biden “downplayed the significance of adding more work requirements, insisting that any new measures would not be ‘anything of consequence.’” The New York Times says, “One of the biggest developments out of Tuesday’s debt ceiling meeting was President Biden’s selection of two officials to negotiate directly with aides to…McCarthy: Shalanda Young, the director of the Office of Management and Budget, and Steve Ricchetti, a White House senior adviser.” According to the Times, “That decision appeared to mollify Mr. McCarthy, who noted after the meeting that ‘we finally have a formula that has proven to work in the past.’” Reuters, the AP, CNBC, Politico and the Washington Post also report.
Reuters says that while the US supply chain “is healing from early pandemic shocks that sent shipping costs skyrocketing and squeezed supplies of everything from toilet paper to pasta…material shortages and hiring woes” are persisting over three years later. Reuters continues, “The labor market remains tight, fueling costs. Elsewhere, machine parts shortages persist and cement has become difficult to find as automakers and other manufacturers catch up with demand and the U.S. ramps up infrastructure projects.” According to DAT Freight and Analytics analyst Dean Croke, the US supply chains “are suffering from a ‘long-term hangover.’”
Lower-embodied-carbon construction materials are the focus of a pilot program by the General Services Administration to explore “Buy Clean” procurement requirements for federal projects. The program, supported by $2.15 billion from the Inflation Reduction Act, involves 11 projects over six months in eight states and the District of Columbia. Full Story: Engineering News-Record (tiered subscription model)
A slow permitting process is holding up many projects funded under the bipartisan infrastructure law as the $1.2 trillion measure reaches the 18-month mark, says Brian Turmail, Associated General Contractors of America vice president of public affairs and strategic initiatives. Other industry figures agreed with that assessment as the White House marked the 18-month occasion by noting that more than $220 billion in funding has been announced for 32,000 projects and grant awards across the US and its territories.
NLRB Ruling Sets Higher Bar for Discipline
A new ruling from the National Labor Relations Board raises the standards for termination of an employee engaging in workplace organization, reports Andy Medici of The Business Journals. The ruling reverses a previous decision in a case involving General Motors LLC that the agency says made it easier for employers to sanction misconduct that occurs as part of a protected activity. In the decision, the NLRB said that conduct occurring during the course of a protected activity must be evaluated as part of that protected activity — and that workers have a right under the law to organize and advocate for better working conditions. The latest decision comes not long after another NLRB ruling that gutted nondisclosure agreements and nondisparagement agreements.
Innovation and sustainability were major themes as suppliers of heavy equipment arrayed their latest equipment across the National Mall in Washington, D.C. The Celebration of Construction display included autonomous machines, equipment powered by renewable energy and technology for job sites, with John Deere, Komatsu, Caterpillar and Trimble among exhibitors. Full Story: Construction Dive
Inflationary pressure continues to push up prices for final demand in the construction industry, although the increase in April was moderate at 0.2%, according to producer price index data from the Bureau of Labor Statistics. A further cautionary note is evident in a slight upturn in the composite index of construction materials, which might indicate bid prices will steepen in 2024. Full Story: Dodge Data & Analytics
Construction industry profit margins narrowed 27% in the first quarter, after 4% growth in Q4, according to a report by the Royal Institution of Chartered Surveyors. The cost of materials and labor contributed to the result from US companies.
Full Story: Construction Dive
April jobless rates down in 14 states; payroll jobs up in 5 states, down in 1
In April, unemployment rates were lower in 14 states and stable in 36 states and the District of Columbia. Nonfarm payroll employment increased in 5 states, decreased in 1 state, and was essentially unchanged in 44 states and the District.
Construction starts for single-family homes rose 1.6% in April, lifting overall housing starts by 2.2% to an annual rate of 1.4 million units. The gain suggests recovery from a prolonged slump, although applications to build eased 1.5%.
Full Story: BNN Bloomberg (Canada)
The institutional component of the Dodge Momentum Index improved 0.3% last month but not nearly enough to counter an 8% drop in the commercial component, leaving the overall index down 5.1%. Shaky banking and economic factors contributed to the decline, as did weaker commercial planning, which “is more exposed to real-time economic changes than the largely publicly funded institutional segment,” says Sarah Martin, associate director of forecasting for Dodge Construction Network. Full Story: Dodge Data & Analytics
Dodge Data & Analytics has reported that a 7% increase in nonbuilding construction starts and a 12% increase in residential building starts offset a 22% decline in manufacturing starts in April, for an overall drop of 4%. Richard Branch, chief economist for Dodge Construction Network, says that the industry is in good economic health but that contractors should expect weaker starts in the second half of the year as projects in the planning phase decline. Full Story: Dodge Data & Analytics
Residential building and specialty trade contractors accounted for nearly 95% of the 15,000 jobs added in the construction industry last month, according to an analysis of federal data. Associated General Contractors of America CEO Stephen Sandherr notes a record small pool of qualified labor available for the month of April and says, “Contractors can’t find, reach, hire and train workers fast enough to keep pace with demand.” Full Story: Equipment World
Construction lending stands to suffer even more because of concerns about bank failures, observers say. Many developers are keeping legacy projects on track, Camden Property Trust CEO Ric Campo says, but fewer starts are evident and a 60% reduction is likely. Full Story: Multifamily Dive
OSHA has selected the danger of falls from height for its latest National Emphasis Program. The NEP begins with 90 days of outreach to educate employers on fall prevention, with planned inspections to follow.
Full Story: Safety BLR
About 10,000 bridges nationwide have construction similar to that of Pittsburgh’s Fern Hollow Bridge, which failed last year, and investigators of the collapse are urging inspections. Legs of the Fern Hollow Bridge had deteriorated because of drainage deficiencies, according to the National Transportation Safety Board. Full Story: The Associated Press
Thirty-nine states, the District of Columbia and Puerto Rico stand to benefit from $749 million from the federal Emergency Relief Program to repair and rebuild roads and bridges damaged by catastrophes. The funding comes through the Federal Highway Administration and complements other programs under the bipartisan infrastructure law.
Full Story: Department of Transportation
Copco 2, the first of four Oregon dams scheduled for removal on the Klamath River, will be gone by the end of September, says Mark Bransom, CEO of Klamath River Renewal. The three remaining dams are to be removed by the end of next year in operations involving as many as 400 crew members, Bransom says. Full Story: KDRV-TV (Medford, Ore.)
Productivity improvement of as much as 30% is available through use of data-gathering telematics on construction sites, according to Trimble. Michael Cheng examines four principal types of data to collect to benefit vehicles, workers, machines and equipment.
Full Story: For Construction Pros
More than $220 billion has been distributed to all states, the District of Columbia and US territories from the bipartisan infrastructure law. An update from the Biden administration offers a rundown by state, territory and tribal grouping of how funds are being spent on a wide variety of projects. Full Story: The White House
Granite Construction has been selected to handle a highway widening project in Sparks, Nev., under a $58 million contract. The Pyramid Highway project widens part of state Highway 445 to six lanes from four. Full Story: Construction Dive
Shovels have hit the dirt on the largest student housing project at California State Polytechnic University, Humboldt. The project is the first building under construction as part of the university’s $458 million expansion. The design-build team includes general contractor Sundt Construction, DCI Engineers, Guttmann & Blaevoet and BKF Engineers. Full Story: The Construction Broadsheet
Lengthy and complex approval processes for multifamily housing projects in Los Angeles extend the application-to-completion pathway to an average of 3.9 years, according to a study from the Los Angeles Business Council Institute. “Delays can occur at every step of the process,” the study states, raising costs and causing “a high degree of uncertainty among developers.” Full Story: The Real Deal
California’s high-speed rail project has advanced with completion of the 3,700-foot Cedar Viaduct in Fresno. The span, with 40-foot-tall cast-in-place arches, carries the rail line over Highway 99 and Cedar and North avenues. Full Story: KTLA-TV (Los Angeles)
The Port of Long Beach in California aims to open a $4.7 billion plant that builds and assembles offshore wind components, including giant turbines. Once assembled, the equipment can be shipped with floating foundations to destinations along the California coast. “Our harbor is ideally located for such an enterprise, with calm seas behind a federal breakwater, one of the deepest and widest channels in the US, direct access to the open ocean and no air height restrictions,” Port of Long Beach Executive Director Mario Cordero says.Full Story: The Construction Broadsheet
· May 19 – Last day for fiscal committeesto hear and report to the floor bills introduced in their house
· June 2 – Last day for each house to pass bills introduced in that house
· June 15 – Budget must be passed by midnight
· July 14 – August 14 – Summer recess